THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JOHN KING, HOST: Thanks Wolf and good evening everyone. Driving our politics tonight the Obama White House and its apology to Shirley Sherrod, that's pretty dramatic on its own, but it is why the White House had to apologize and offer her, her job back that is so fascinating and so troubling.

The White House that is home to the first African-American president embraced a finding that Ms. Sherrod, an African-American official with the Agriculture Department, was guilty of racist behavior and supported a decision to force her from her job without first checking the facts. Taking responsibility for this mess is the agricultural secretary, Tom Vilsack, who called Ms. Sherrod tonight, apologized and offered her a new job at the department.

(BEGIN VIDEO CLIP)

TOM VILSACK, AGRICULTURE SECRETARY: This is a good woman. She's been put through hell. And I could have done, and should have done a better job.

(END VIDEO CLIP)

KING: Ms. Sherrod tells us she's grateful for that apology, thinking about the job offer, and while we have a lot of questions tonight this one from her is perhaps the most compelling. What will her grandchildren think when they're old enough to read about this?

(BEGIN VIDEO CLIP)

SHIRLEY SHERROD, FORMER USDA OFFICIAL: Their grandmother being the first black person to be state director of rural development in Georgia was asked to resign by the first black president, you know, it's like, oh, my goodness.

(END VIDEO CLIP)

KING: Some of the answers or non answers given by the White House today were, in my view anyway, well short of its promise to be more transparent. And the suggestion the rush to judgment was in part because of reporters clambering for comment is, for starters, a cop out. And it seems at odds with this frequent lecture from the president.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: A big part of our campaign was about changing the way Washington works. It was about transforming a politics that's driven by cynicism and a 24-hour news cycle and the cable chatter.

(END VIDEO CLIP)

KING: That's not to say this is all the administration's fault -- hardly. This mess started with a conservative blog posting that took comments by Sherrod about race out of context. And the NAACP, an organization founded to promote the basic idea that we should treat everyone fairly, joined the White House in the unfair rush to judgment. So now what?

Our lead panel tonight knows the risk of mixing race and politics and knows a bit about how a White House handles crises. Here with me is California Congresswoman Barbara Lee. She's the chairwoman of the Congressional Black Caucus whose members just met with the agriculture secretary, Mr. Vilsack.

In New Orleans, CNN contributors James Carville and Mary Matalin. And in San Francisco, the Reverend Jesse Jackson. Congresswoman let me start with you because you just had this meeting with Secretary Vilsack. He is saying this was my decision. This is my responsibility.

But we do know, as early as Monday, they alerted the White House about this video. They thought they might have a problem. Do you want and do you think the American people deserve to know the back and forth between the Agriculture Department and the White House, who at the White House was aware of this, what did they say back to the department? Do we deserve to know that?

REP. BARBARA LEE (D-CA), CHAIRWOMAN, CONGRESSIONAL BLACK CAUCUS: Clearly, the American people deserve to know. This is a White House that really is a transparent White House. An administration that is transparent. The Congressional Black Caucus met with the secretary just a few minutes ago. It was a very candid, very open meeting.

He apologized. When one makes a mistake, we expect an apology. Also, we talked about Ms. Sherrod's life, her experiences, and the sensitivity that she brings to the Department of Agriculture, which has been really a department that hasn't lived up to --

KING: Could he explain to you why they got so hypersensitive about race and the worry about how this would play politically that they acted without having the common decency of, "A", making sure they read the speech in its entirety and, "B", asking her at his level what happened?

LEE: The secretary admitted that he did not have the facts that he acted hastily that he should have taken time to review the entire video, that he should not have had such -- made such a decision and a rush to judgment just as he did. And he was very humble in his apology I must say.

And we asked early on today that he actually offer Ms. Sherrod her position back. And we told him that that was just unacceptable and, in fact, we have got to have this national conversation about race. The Congressional Black Caucus continues to say that this is not a post-racial era. We have to raise this to the level of the country in terms of trying to find a healthy way to talk about race and all of the problems that we still have. We've come a long way but we have a long way to go.

KING: And James and Mary, you have both helped presidents deal with crises. I want your take on how much you think the rush to judgment here was impacted by this story at least if you believe the conservative blog posting was a toxic mix of race and politics.

JAMES CARVILLE, CNN POLITICAL ANALYST: Well, yes, look, obviously, it was and it was -- they messed up. I mean the secretary of agriculture (INAUDIBLE) flog him. He said he made a terrible mistake. He made an error in judgment. He's moving to correct it. I don't know exactly what more the man can do --

UNIDENTIFIED MALE: OK.

CARVILLE: -- and maybe we ought to, you know, tie him up and flog him or something like that. But he -- they made a big error and yet, you're right and it did have to do with the toxic -- but the reason they did it is because this clown filmmaker set out an edited tape. If I was Ms. Sherrod, I'd sue him.

(CROSSTALK)

MARY MATALIN, REPUBLICAN STRATEGIST: The reason --

(CROSSTALK)

CARVILLE: He's at the fault of it.

MATALIN: The reason they keep repeating the same mistake and they don't take advantage of their teaching moments is because of the presumption of race and that Republicans and conservatives are racist. A year ago today or tomorrow, the president said the Cambridge cops were stupid. The tea bag people -- the Tea Party people -- see, I can't even -- they've call them that so much -- see what I mean?

They presume and they accuse conservatives of racism and they rush to judgment and they manufacture and flagrantly lie about conservatives of all stripes on radio, off the air, and they have this elitist --

CARVILLE: I'm sorry --

MATALIN: -- something despicable attitude and then they want to have --

CARVILLE: I'm sorry --

MATALIN: -- a national dialogue -- I'm not having this conversation with him, John.

CARVILLE: I'm sorry -- MATALIN: Do you want to have a conversation --

CARVILLE: I know. I'm sorry, but the person that edited -- the dishonest person in this was the filmmaker.

KING: And that is one factor in this without a doubt. Reverent Jackson, I want you to join the conversation. As you can see, once you start one of these conversations you get into a crackling debate. There's a lot of politics involved. But why, why, and I guess should -- were we wrong to expect it might be different with the first African-American president that when they are dealing with an issue like this, that they have the sensitivity from their own history perhaps and their own statements to say, Mr. Secretary, take a deep breath. It doesn't matter what some right wing organization is saying. Let's check this out before we act.

REV. JESSE JACKSON, RAINBOW PUSH COALITION: Well, race remains a hypersensitive conversation. Whether it is one (INAUDIBLE) before she had a chance to have a hearing, Van Jones, just the magic of it all. You see to me here's a case where the bloggers and cable networks (INAUDIBLE) putting stuff on the air. There's a reaction to that, an overreaction to that.

She was (INAUDIBLE) due process and that becomes should -- one of the teachable moments. I hope that -- two things. One, since this is a good news ending that the Spooner family, the white family and the Sherrods are being invited to White House, much like Crown (ph) and Gates (ph) were, because they represent something wholesome.

This is really a good news ending of a tragic situation. And last, I think Barbara's right. It's not just (INAUDIBLE) racial conversation, but to close real racial gaps. I mean nine percent of unemployment for the nation, around 27 percent for blacks, for example, number one in infant mortality, number one in short life expectancy, number one (INAUDIBLE) home foreclosures. The race gap and the structure sense, in fact, are getting wider.

KING: Congresswoman, do you believe this is case closed or, as we discussed earlier, do you have more questions about how this was handled? Just to make sure, Secretary Vilsack seems to have gotten the message. I've known him for a long time. He seems very contrite and very humbled.

But we still don't know and they will not share with us what his deputy said. Ms. Sherrod, for example, said she was told repeatedly the White House wanted her to resign as quickly as possible. Now people in this town sometimes exaggerate. We should be clear. A lot of people say the White House told me when it might have been somebody else. But do you need to see a public accounting, the documentation of the back and forth in the conversations before you can say case closed?

LEE: We're not saying case closed. We're going to say the facts will definitely, as they have to now, speak for themselves. But I think what's important is that, one, the secretary apologized, two, that Ms. Sherrod, her life now is really a life that should serve as an example. I mean, when you look at the struggles that she has been through, her transformation and how now the story of redemption and how this wonderful woman -- like many African-Americans who have been discriminated against, have turned their lives into something that really is a life of making America better.

And that's the story. She's a hero if you ask me. And I think what Reverend Jackson said about this moment, we have to look at the fact that there are economic inequalities, racial inequalities in our country. When you have us working now on a jobs bill, trying to get young people jobs for the summer. We can't even get a jobs bill passed. When you look at the huge gaps in unemployment, health disparities, when you look at the fact that our communities are polluted, when you look at the huge inequalities and inequities in this country there still remains much business that has to be talked about, it has to be swept out from under the rug and we need to deal with it.

KING: Reverend, I'm going to ask you to hold on just one second --

JACKSON: John, John --

(CROSSTALK)

KING: Our whole panel is going to stay right here. One second, sir, we'll get you on the other side. We've got to take a quick break. As many are saying, including the White House, this is a teachable moment -- who needs to be taught and what -- when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

VILSACK: I'm not certain in what period of time the White House was contacted, but as these called were being made, the White House through the liaison's office was aware, but the decision to do what was done was done by me.

(END VIDEO CLIP)

KING: Agricultural Secretary Tom Vilsack explaining a short time ago and taking full responsibility for his decision he said to first force Shirley Sherrod to quit her job at the Agriculture Department. He now hopes she will come back.

Let's continue our conversation on this issue. We'll go out to the Reverend Jesse Jackson. He's in San Francisco. When you hear that explanation, and that's called manning up, the secretary taking responsibility there, but Reverend Jackson, you mentioned beforehand maybe Ms. Sherrod and maybe those white farmers that she helped twenty some years ago could come to the White House. Do you believe the president of the United States, whether he had a direct hand in this or not, needs to address it with the American people?

JACKSON: It's become such a huge issue knew now. I think the Sherrods have a tremendous background in civil rights, by the way. Her husband, Charles Sherrod, was one of SNCC's founders 50 years ago this year. Given the loss of her father to this matter. I think that the Spooner, the white family, and the black family coming together is a big statement.

But that's the symbolic part of it. The bigger issue beyond that, the day that they had the beer summit about the Gates/Crowley (ph) situation (INAUDIBLE) attorney general from Illinois on that day found that these major banks that we have now bailed out engaged in a reverse red lining targeting blacks and browns. And black making $100,000 a year got the sub prime (INAUDIBLE) loan. Blacks making 50,000 got a prime low cost loan. The growing gaps of inequality requires symbolism but more than that it requires a commitment to enforce and form civil rights law.

KING: Mary and James, if this is a teachable moment, as the White House says, let me ask each of you, and to you Mary first, you weren't happy with your husband's answer in the last block there, have you learned a lesson here or who do you think needs to learn a lesson?

MATALIN: No, if you're asking me personally, I learned the lesson a long time ago. This is not a need for a national dialogue. This is a need for kitchen table dialogue. I grew up in the north where Reverend Jackson's from. I live in the south. Black mothers here have the same concerns as white mothers.

Black entrepreneurs here have the same concerns as white entrepreneurs. People need to sit down and talk to each other. What happens in politics is people lock in to positions, stupid positions, to further their political goals, and it truncates or it mitigates (ph) or it eliminates any possibility of a real conversation, so people need to go to their kitchen table --

JACKSON: John, John --

MATALIN: -- go to the same churches and invite each other into each other homes. That's -- we got -- all the policy and all that stuff, as long as we have people who are making good politics off of bad, ugly scenes like this, we're not going to make any progress on the relations. We have made a lot of progress.

JACKSON: I'm not --

MATALIN: It's not -- the job's not done --

(CROSSTALK)

MATALIN: -- there's a lot of progress on the policy.

JACKSON: A kitchen table conversation would not address nine percent unemployment for America and 20 percent for blacks (INAUDIBLE). Mr. Barack was (INAUDIBLE) will not address the structural inequalities and less access to school and more access to jail. We must -- we need an urban policy.

Addresses the inequalities that has us -- we've come together in the horizontal sense. Blacks and whites can now socialize. But the gap between access to capital, education, health care and industry continues to mount.

LEE: We have to have this conversation throughout the country. I think we do need to have these conversations at the kitchen table and in our communities. But we also, and as a member of Congress and as chair of the Congressional Black Caucus, we have to have a national dialogue. For example, about why in the world we cannot get a jobs bill passed for our young people.

KING: Let me ask --

(CROSSTALK)

LEE: We have to have a national dialogue about issues --

KING: Let me ask you a specific question about this case, though.

LEE: -- where there are racial and economic disparities.

KING: Let me ask you a specific question about this episode though. The Congressional Black Caucus, you are the chairwoman, they put out a statement this morning, said "The Congressional Black Caucus continues to believe that Ms. Sherrod was unfairly asked to resign without due process and should be reinstated immediately."

You used the word continues. We tried to get someone from the Caucus on the show yesterday and we tried to get a statement and we were told everyone was being very careful because they were trying to figure out exactly what happened. You used the word continue that suggests that there was a previous statement on the record. We can't find one.

LEE: There is no previous statement on the record. We had discussions among ourselves. We're not going to be responsive and reactive immediately based on not having all the facts. We worked through the night assessing the facts, understanding what took place, and immediately this morning concluded that we had to issue this statement and had to ask for the reinstatement of Ms. Sherrod and for an apology and for the secretary to really understand that he acted too swiftly.

The Congressional Black Caucus acted as soon as we had all the facts, and we considered this an issue that we have to address. And we need to continue to really work on in terms of our overall agenda to bringing race to the forefront of the national dialogue.

KING: Mr. Carville, you want a final thought here?

(CROSSTALK)

CARVILLE: What happened --

(CROSSTALK)

JACKSON: -- and due process (INAUDIBLE) that must be addressed.

KING: James?

CARVILLE: Yes, what happened was is somebody edited a tape, released it, and public officials reacted erroneously and apologized profusely for it. And to try to -- you know it was about a very sensitive issue about a racial issue and that's what it -- that's what the facts are here. And everybody knows that the secretary of agriculture made a horrific mistake.

Everybody knows this was edited and that's what happened here. It's tragic for this woman. But I suspect she's a pretty strong lady and she dealt with worse than -- you know her husband was killed by the Klan. This woman is a pretty strong person and is a kind of role model I think for the country.

(CROSSTALK)

LEE: Many people have lost their jobs, but their reputations have been tarnished based on erroneous information.

Still a lot more to come in the program, as you can see, this is a feisty debate. And we will continue to talk about the important issues throughout the night. But when we come back we'll also go "Wall-to-Wall" to remind you there's been a trial out in Illinois, the former Governor Rod Blagojevich.

The defense rested today and the defendant said I talk too much. Does that mean no taking the stand? That is exactly what the means.

Our most important person you don't know today is from the state of New Hampshire and he's taking on Sarah Palin. Wait until you hear what he says about her meddling, he says, in his state's politics. Thanks, but no thanks was that message.

And on our "Radar" tonight, some fascinating political stories, but this one is downbeat (ph). The Fed chairman says the economy is unusually uncertain. The outlook for the economy. That's tough in this campaign year.

And do you want to re-elect this president? We'll show you some numbers. Don't go anywhere.

(COMMERCIAL BREAK)

KING: Welcome back. Let's check in with Joe Johns for the news you need to know right now -- Joe.

JOE JOHNS, CNN ANCHOR: John we begin with breaking political news. The Justice Department announcing that former U.S. Attorney General Alberto Gonzales will not be charged in the controversial firings of nine U.S. attorneys.

There's also breaking political news on Capitol Hill. The Senate has just passed the bill extending unemployment benefits until the end of November for some 2.5 million people. The House will take up that bill tomorrow. Earlier today, President Obama signed the big Wall Street reform bill.

(BEGIN VIDEO CLIP)

BARACK OBAMA (D-IL), PRESIDENT OF THE UNITED STATES: These reforms represent the strongest consumer financial protections in history, in history.

(END VIDEO CLIP)

JOHNS: More problems for Republican Party Chairman Michael Steele. "The Washington Times" reporting the RNC failed to report more than $7 million in debt to the Federal Election Commission.

And today in a surprise move, the defense in the Rod Blagojevich corruption trial rested without calling the former Illinois governor to testify. And I suppose that's a big risk. But on the other hand, there have got to be a lot of prosecutors out there having nothing to do with this case who have just imagined themselves cross examining Blago for hours. I would just love to do that.

KING: Joe, you would love to be in that courtroom. I would love to be in that courtroom. You know the reporters covering this trial are so disappointed they are not going to get the drama of Governor Blagojevich on the stand. And on that point, let's take a closer look at just what's at stake here in case you've forgotten about this case.

This is Governor Blagojevich. That's his mug shot. This was a case essentially a big corruption case about pay to play. Was this a corrupt operation? Was the governor in fact trying to sell President- elect Obama's Senate seat? Was he putting family and friends on board in exchange for sweetheart deals?

Was he pressuring, trying to pressure the "Chicago Tribune" to fire writers that disagreed with his administration? Was he rushing to raise money before an ethics law was changed, that is part of the charges too. And was he withholding children's hospital money again in part of a pay to play political dispute?

Tough charges against the former governor there. And as you move this case forward what did the White House know was one of the big questions. Just after he was elected president, before he became president, President-elect Obama said he had no contact with the governor. But then David Axelrod, his top adviser, did concede they did have a conversation.

The next month, December 2008, Axelrod said, but that conversation was not about the Senate seat. And prosecutors rushed to make clear there were no allegations against then-Senator and President-elect Obama. Valerie Jarrett, a top adviser at the White House though because of this investigation, removed her name from any consideration for the Senate seat.

Rahm Emanuel, the current White House chief of staff is -- we do know he sent a list of acceptable candidates out there. Emanuel and Jarrett were subpoenaed -- they could have been witnesses, but lucky for the Obama White House, neither one was called to testify, as the case closed right now.

But why is this case so colorful? Because as he was considering filling the Senate seat, Governor Blagojevich said how about Oprah Winfrey? Even though this guy lives in California, he also brought up the name of the California Governor Arnold Schwarzenegger. This is Valerie Jarrett of course.

Early on, she was the White House favorite. Again, she works at the White House now. And yes, Governor Blagojevich thought long and hard about maybe appointing himself. So it's a high-stakes case anyway. It's a colorful case. One of the reasons though it would have been so delicious to hear this governor, former governor testify is because when he talks, boy, he can be interesting.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I don't believe there's any cloud that hangs over me.

KING: Because of that lesson, Governor Blagojevich will not be taking the stand. Jeff Coen is a "Chicago Tribune" reporter who has been covering every second of this trial. He takes us inside the decision to keep the governor from testifying.

(BEGIN VIDEO CLIP)

JEFF COEN, CHICAGO TRIBUNE: There was a bit of a split among his legal team. Some of the lawyers wanted him to go on, especially because in opening statements the defense promised the jury that he would testify. But in the end, his most senior lawyer thought it was just not a good decision at this stage for him to do it.

(END VIDEO CLIP)

KING: We'll keep track of that trial as it makes its way to the ending and the ultimate verdict.

And when we come back, at the White House today, Robert Gibbs said the media has a big role too in this whole controversy over Shirley Sherrod and her losing her job. We'll explore that on the other side of the break.

(COMMERCIAL BREAK)

KING: So, if you listened to the White House briefing today where Robert Gibbs had to publicly apologize on behalf of the administration and that means including the president to Shirley Sherrod, he said yes, the White House and the administration had done a lot of things wrong, but he also said that part of the reason was because people in my business, reporters, constantly call up and say, hey, I'm on deadline. I need an answer now. Here's Robert Gibbs saying yes, we have a problem, but you do too.

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I think we live in a culture that -- things whip around, people want fast responses, we want to give fast responses.

And I don't think there's any doubt that if -- if we all look at this, I think the lesson, one of the great lessons you take away from this is -- is to ask all the questions first and to come to that fuller understanding.

(END VIDEO CLIP)

KING: Yes, we should ask all the questions first and come to a fuller understanding. Yes, we sometimes pester people saying we're on deadline and need an answer now.

But I could go through a long list of times when this White House, other administrations, other people we contact in politics say, we're still looking into that, I don't have an answer for you. GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Right and I think, you know, you can blame the media all you want in this, but he's right, they didn't do their homework.

And I think you have to not blame the media, but sort of take a look at the context in which this occurred. This came after the NAACP had said, you know, Tea Partiers, you've got to condemn racism within your ranks, which the Tea Party, by the way, did.

And so we were in this environment in which race and politics, which is always a toxic mixture, were becoming an issue. And then this story came out and clearly someone, we don't know quite who and we don't know quite how it unfolded, somebody decided, OK, we have to put the Kebosh on this.

KING: Excellent, hang on just one second because I want that followed on that point. This is a White House that believes it was unfairly -- shall we say there was overkill with Jeremiah Wright, the controversial about the president's former pastor.

And that some conservative news outlets just played over and over again the Jeremiah Wright clips in an effort, they believe at the White House, to try to damage this president politically.

If you listen to Shirley Sherrod, what she says her understanding of why she was being told quit and quit now was that some in the White House or somewhere in the administration thought it was going to happen again.

(BEGIN VIDEO CLIP)

SHIRLEY SHERROD, FORMER USDA OFFICIAL: That was Cheryl Cook, the deputy undersecretary. She called me and said -- because she called me and I said, Cheryl, I got a 3 1/2 hour ride to get into Athens.

She called me a second time. Where are you now? I said, I'm just going through Atlanta. She called me again. I said, I'm at least 45 minutes to an hour from Athens. She said, well, Shirley, they want you to pull over to the side of the road and do it.

(END VIDEO CLIP)

KING: Because, she said, you're going to be on Glenn Beck tonight. That was the final thought from Shirley Sherrod there. Now, Glenn Beck says no, we didn't do this.

KING: Are they so hypersensitive, a) to the race issue and, b) to what Fox or somebody else might say about them?

JOHNS: Well, it's very hard. This is the first black president and I think it's very hard to figure out what's the right balance. You know, when do you go after somebody? When do you leave somebody alone? When do you weigh in? When do you stay out of it because the electorate is watching?

I talked to one guy, true believer, but nonetheless, a guy who work poll, and he said, if you look at this in context this isn't that big a problem for this president.

Because at the end of the day, what it is, is some bad information getting out there, and the administration trying to do the right thing. And basically they ended up firing Mother Theresa.

KING: The NAA -- that's good. The NAACP statement last night said they were snookered by this conservative blogger Andrew Breitbart who I spoke to last night and by Fox News. Shep Smith on Fox earlier today said "don't blame us."

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The White House said it is not, but it clearly is obsessed with Glenn Beck and others.

KING: No doubt about it.

UNIDENTIFIED MALE: I mean, anyone who doubted it can now stop doubting it.

(END VIDEO CLIP)

BORGER: You know, I don't know if "obsessed" is the right word. There have been a number of, shall we say, forced resignations, including Van Jones who was on the White House staff, the communications director of the National Endowment of the Arts, et cetera, et cetera.

That were, shall we say, criticized by Fox, and they ended up -- and they ended up losing their jobs. There were others that were criticized by Fox that didn't end up losing their jobs.

JOHNS: They don't want this stuff to start to get traction.

BORGER: Out of control.

KING: They don't want it to get traction to the point where they would accept a conservative outlet's conclusion that this woman was a racist.

JOHNS: Yes.

KING: Without checking the fact, without checking her speech? And as you know, if you play the entire speech, I don't know if she used Mother Theresa, but it is a remarkably nuanced and intelligent conversation about race.

JOHNS: Yes, people don't listen. You know, all they hear is black, white, he said this, the Black Panthers, you know, she's a racist, whatever, and that's what they hear.

BORGER: -- And this is the White House that clearly doesn't want race to become the issue. You're right, first black president, don't want race to become the issue. But in avoiding race, you make it more of an issue --

KING: If they hope to stifle a race debate this week by doing what they did, that one didn't work out so well. Gloria and Joe, thanks so much.

Two possible 2012 presidential contenders square off. We'll tell you how and where when we come back.

(COMMERCIAL BREAK)

KING: Today's most important person you don't know is one of the toughest, crankiest, in a good way, people in New Hampshire politics although technically Joe McQuaid isn't in politics.

He's president and publisher of the "Union Leader of Manchester." His father and grandfather were newspapermen as well. McQuaid started at age 15 and was an editor by 22. It's a great story.

His dad, in failing health, complained about the paper one night and McQuaid pointed out, hey, I'm only a reporter. A week later, he was the editor. As for the tough and sometimes cranky part, just ask Sarah Palin.

McQuaid's editorial today rips her endorsement of the Republican U.S. Senate candidate, Kelly Ayotte. Don't fret over what at Mama Grizzly from Alaska does. She spent a few hours here on one day during the 2008 presidential election. That's still more time she spent than getting to know Ayotte.

Neil Newhouse, Republican strategist who's dealt with the union leader once or twice or thrice in his life, Cornell Belcher, Democratic strategist. They don't pick on Democrats too much. They like to keep it in the family up there in Manchester.

But how influential is the union leader? And if Sarah Palin's going to play in New Hampshire, I guess she better have coffee with Joe McQuaid.

NEIL NEWHOUSE, REPUBLICAN STRATEGIST: Well, everybody's playing in New Hampshire. The Senate primary they're involved with right now is a very competitive race. Kelly Ayotte is one of the two front- runners there.

But, you know, every place around the country, we've seen Sarah Palin's endorsement really have an impact in some of these races. So I wouldn't count her out in a matchup against the union leader right now.

KING: Let's listen, just a short time -- hang on, just a short time ago, I spoke to Joe McQuaid and I asked him, why are you so determined to pick a fight with Sarah Palin?

(BEGIN VIDEO CLIP) JOSEPH MCQUAID, PRESIDENT AND PUBLISHER, UNION LEADER CORPORATION: We ain't scared of nobody, even Mama Grizzlies. I never met Governor Palin. She may be a great lady. But she doesn't -- clearly doesn't know New Hampshire. New Hampshire does not like to be told by outsiders whom it should choose for political office.

KING: Obviously, she's keeping her options open. Is Sarah Palin a viable 2012 Republican contender in New Hampshire? Is she a viable 2012 Republican contender, perhaps more importantly, in the short term, with the "Union Leader?"

MCQUAID: Well, I think she's certainly a viable contender in 2012, the numbers and recognition and some of her following guarantee that. And New Hampshire's a place, John, where you know I think better than she does at the moment, that you can come up here, like McCain did, and really win over an audience, even if you're not the biggest name and the biggest money.

(END VIDEO CLIP)

KING: It's all yours.

CORNELL BELCHER, DEMOCRATIC STRATEGIST: I got to tell you, you know, I remember when Sarah Palin went up there because I actually was doing polling at polling New Hampshire. I love the fact she was up there because as long as he stayed up there, the worst John McCain numbers got.

Look, with independent voters and he's v hopeful in a Republican primary, but I'm telling you in a general election with the independent voters in a state where close to 50 percent of the voters call themselves independent, she absolutely killed them.

The more they knew about Sarah Palin, the less they liked her and she single-handedly I think turned New Hampshire from a toss-up state to one who went Barack Obama.

NEWHOUSE: I think that's exactly the reason she's in there, in the primary. She's going to play a role in all these primaries across the country. She's got some impact with the Republican primary voters.

KING: But she's not favorable.

NEWHOUSE: We're not in a general election yet --

KING: We got plenty of time to --

All right, time-out on Sarah Palin. Let's move on to SOME other stories on my radar tonight. Today, you might call the most important person we haven't heard from is Cheryl Cook.

She's the Agriculture Department's deputy undersecretary for rural development. And the woman, Shirley Sherrod just called her three times on Monday telling her the White House wanted her resignation. This afternoon, Secretary Vilsack was asked about Cook's involvement in the Sherrod fiasco.

(BEGIN VIDEO CLIP)

TOM VILSACK, AGRICULTURE SECRETARY: I obviously was not party to those conversations. It may very well be that during the course of the conversation, Miss Cook indicated that a White House liaison had been contacted, but I don't know that she necessarily indicated that there was any pressure, because that was not the case. This was something I decided and I have to accept full responsibility for this.

(END VIDEO CLIP)

KING: Do we need to find out the tick tock here? There are people in Washington who say the president told me this, when it was the deputy assistant secretary for you know what. That happens in town. But if she was told the White House wants you to go and the White House says that's not true, do we need to figure that out?

BELCHER: Look, the secretary stepped up to the plate. He asked for -- it's an important thing. He stepped up to the plate, took full responsibility, and he asked for her forgiveness. That was important. She forgave him.

The problem is, this is an incident that should go back, quite frankly, to Breitbart because this guy went after her intentionally and consciously put out some false allegations to destroy a good woman.

The thing is it's not an isolated incident. We see it time and time again in politics, just not from the right, but also on the left, but although you guys have taken it to a fine art.

NEWHOUSE: Of course, come --

KING: This is the thing that Americans dislike and it's why you can't trust politics.

NEWHOUSE: You know what this is about? This is really about election politics. This is nothing more than an embattled white house with a 44 percent job approval rating.

BELCHER: It's actually a little higher than that.

NEWHOUSE: That is looking ahead to November election and is worried about white voters are going to (inaudible) from Barack Obama. That what's I think about.

BELCHER: I think that's insulting. When that guy, that dirtball, intentionally puts out misleading evidence to try to --

NEWHOUSE: That's the first time that's probably ever happened, right?

BELCHER: He's personally hurt this woman and took her through hell. Yes, in this sort of way, it is the first time I've seen it happen in my lifetime to this extent. That guy's a dirtball and it happens too often in politics.

NEWHOUSE: The lesson is you have to you've got to do your homework in this stuff. The White House overreacts. The administration overreacts. They make this woman pull over to the side of the road and the resign by Blackberry --

BELCHER: For you to try to make this about the White House when you had this dirtball engaged in politics is a little shocking.

KING: All right, let's squeeze one more here from the radar. President Obama reelection numbers are looking to borrow Ben Bernanke's phrase today unusually uncertain.

Only 4 in 10 people in a new (inaudible) survey say the president deserves a second term, 48 percent say, no he doesn't. Do you think that's bad? Only 34 percent of independents say the president deserves re-election. Two good pollsters here. Does it matter this far out?

NEWHOUSE: A kind of mediocre pollsters.

KING: Do those numbers matter this far out? Why do tell you?

BELCHER: Well, let me give you the spin. He's going to refute my spin. But here's the thing, when you look at the national re- elect, right now it's at 49 so the president's number actually isn't that far out of line where it is right now.

And frankly over the last two cycles we've seen a lot of people get reelected with 47, 48 re-elect. Once upon a time, it was 50% you're in good shape. Now it's a lower standard.

Other part about this, it's interesting, is that this number isn't that out of whack with what we saw with Bush, and quite frankly with Clinton. When you look at the president's job approval numbers and when you look at the matchup, his numbers aren't out of whack with where Clinton was and where W was.

NEWHOUSE: Way to lower the bar.

BELCHER: It's my job.

NEWHOUSE: We got a long ways to go. I'd be worried if I was the president, the president's team right now, but truthfully it really doesn't mean that much between now and -- we'll see what happens after this election.

KING: That was fair. Stop that. All right, you guys stay right here. When we come back, Senator Harry Reid takes a wrong turn when criticizing Republicans. We'll bring you that mess up we'll call it and much more we breakdown today's political in the play by play when we come back.

(COMMERCIAL BREAK) KING: Here's something important we just noticed. Within the past hour, Conservative activist Andrew Breitbart has posted a correction of sorts on biggovernment.com., the website where he posted the original story and video about Shirley Sherrod.

The update says simply Ms. Sherrod made the remarks captured in the first video featured in this post while she held a federally appointed position, the story she tells refers to actions she took before she held that federal position.

And with us for "Play-by-Play" tonight, Democratic Cornell Belcher, Republican Neil Newhouse and let's start with that controversial activist Andrew Breitbart who put up the video of Shirley Sherrod.

Clearly, if you watch the whole speech, what he put up was taken out of context. I interviewed him last night. He was make the point this is not about Shirley Sherrod.

He wanted people to look at that video clip he says no so much for what she was saying, but how the NAACP audience was reacting. So let's put it to the fact check. First, listen to Andrew Breitbart.

(BEGIN VIDEO CLIP)

ANDREW BREITBART, PUBLISHER, BIGGOVERNMENT.COM: What you see on the video are people in the audience at an organization whose sole job is to fight against discrimination, and they're applauding her overt racism that she is representing.

SHIRLEY SHERROD, STATE DIRECTOR, USDA RURAL DEVELOPMENT: What he didn't know, while he was taking all that time trying to show me he was -- I was trying to decide how much I was going to give him. I figured if I take either one of them, that his own kind would take care of him.

(END VIDEO CLIP)

KING: There was a little laughter there, and then she goes on in this story to talk about how she confronts -- she says, I was prejudiced against this man at first. She makes very clear her views about him were influenced in part by some prejudice.

And then she says I realized what I was doing and this man needed my help and I gave it to him. If you listen to the whole speech, it's actually very inspiring.

BELCHER: John, the guy's a liar. I mean, let's just call it what it is. The guy is a liar and you know, there was no cheering and waving about what she said. There was a couple chuckles because quite frankly I even thought it was funny.

He took this anecdote this transcending anecdote that she was using to have a conversation, a real honest conversation about race in the south, and he used it against her in a political way. This sort of thing goes on way too often in politics and it's why most Americans can't trust politics.

NEWHOUSE: John, wasn't there another segment in there that when she did talk about something and they did applaud or laugh, when she talked about -- helped the white farmer?

BELCHER: No, there was not.

KING: There are some nods and murmurs of approval. There's no point in which there's consistent or --

BELCHER: That story is a well-planted lie for political purposes and let's leave it at that.

KING: Let's move on to something we find fascinating because we track all the ads in the campaign. So I want to introduce you to a candidate. His name is Brad Ellsworth. He's a Democrat, running for Senate in Indiana. He wants you to know he was a sheriff and Washington's a bad place.

(BEGIN VIDEO CLIP)

BRAD ELLSWORTH: I paid my own way through college working at Sears. And my 25 years as sheriff was all about putting other people's needs first. The U.S. Senate needs that same approach. Senators should be helping other people, not just helping themselves like Washington always does.

(END VIDEO CLIP)

KING: Now, we want to be clear sometimes we say politicians are being inconsistent. Take a look at this. Brad Ellsworth is very consistent.

(BEGIN VIDEO CLIP)

ELLSWORTH: One thing that 25 years as a sheriff teaches you is zero tolerance for bull. There's too much at stake. In Washington, it's like they live and breathe this stuff.

(END VIDEO CLIP)

KING: A zero tolerance. Brad Ellsworth, this just in, is a Democratic member of the House of Representatives. He's in Congress right now.

NEWHOUSE: He's a two-term member. He voted for the health care legislation. He voted for the bank bailout. He's voted with the Democratic leadership 88 percent of the time. This is a bunch of garbage.

BELCHER: He voted for the bank bailout that's going to reform -- he voted for the bailout that helped stabilize our --

KING: The White House view of that - why does he pretend Washington's a foreign land?

BELCHER: Because Washington is a foreign land. By the way, he's a really good-looking guy, I'd vote for him.

KING: All right, really quick, the Senate Majority Leader Harry Reid goes to the floor today. He's make the case against Republicans or against everything we do around here financial reform, and includes the big bailout legislation for the auto industry that Harry Reid says --

(BEGIN VIDEO CLIP)

SENATOR HARRY REID (D) MAJORITY LEADER: If it had been up to them, General Motors would be gone. If it were up to them, Ford Motor Company would probably be gone.

(END VIDEO CLIP)

KING: Ford Motor Company did not take any of the bailout money. Chrysler did, GM did, Ford did not. It happens to be the most healthy of the big three at the moment.

NEWHOUSE: It's a misstatement. He's under a lot of pressure. He's in the middle of a tough campaign. Probably hasn't had time to do his homework yet.

BELCHER: He misspoke all four, but you get the general point of what he was saying, that Republicans were not there with him on bailing out GM and Chrysler and if we hadn't, guess what? Thousands of jobs would be gone and two great American car companies would be gone.

KING: Cornell and Neil, appreciate your time tonight. When we come back, "Pete on the Street" takes a look at photo shopping. Politicians have being do it, well, longer than you think.

(COMMERCIAL BREAK)

KING: Our offbeat reporter Pete Dominick did some tough investigative work today on photo shopping and would you ever do it? What would it ever play? Before we get to Pete, let's show you a little bit what we're talking about.

This is the picture, if you go to the BP website, you can see this here. It the BP control center, all these pictures, the monitor, the feeds. You've seen way too many of these over the past three months. The pictures undersea, but remember this.

Look at the spot in here, see these spaces, look at this, see those filled in? This is the original. They photo shopped it. There's nothing here. Nothing, nothing here.

Now let's go back to the modified. See that there, photo shopping is the skill involved in that or some would say the scam involved in that. "Pete on the Street" investigating.

PETE DOMINICK: John King, this is my favorite story in a while. I mean, and they admitted to Photo Shopping a command center. I went out and I wanted to ask people, had they ever Photo Shopped themselves, make themselves look a little bit better, maybe when they're younger, to buy alcohol. Here's what we found out.

DOMINICK: Have you ever altered an image of yourself?

UNIDENTIFIED FEMALE: No, I'm not BP. I'm not trying to do that dishonest.

UNIDENTIFIED FEMALE: I think I like Photo Shopped my skin to make it look better.

UNIDENTIFIED MALE: I put a yarmulke --

DOMINICK: Just because you look Jewish?

UNIDENTIFIED MALE: Yes.

DOMINICK: How did that work out for you?

UNIDENTIFIED MALE: I started getting Jewish girls.

DOMINICK: Did you ever create a fake I.D. to buy alcohol? Come on. You can be -- have you ever --

UNIDENTIFIED MALE: Do, right, is take the line and make this little fake mustache and sideburns, right.

DOMINICK: You're still doing that sir, aren't you? Come on. Are you creating a fake I.D. on that computer right now? Have you ever used I-photo to create a black and white image of yourself?

UNIDENTIFIED FEMALE: Yes.

DOMINICK: Why would you do such a dishonest thing? People are going to think when they meet you in real life you're black and white. Have you ever photo shopped an image of yourself to appear older? You look like a guy who has photo shopped images of himself on a singles website. Yes or no?

UNIDENTIFIED MALE: Yes.

UNIDENTIFIED MALE: Good evening, I'm Pete on the street. Live for CNN, this is -- so how do you like New York?

DOMINICK: I love it here. The people here, a lot of people and things and stuff also.

John King, back in Dorchester, Massachusetts, growing up, did you have a fake I.D.?

KING: No, sir, I did not.

DOMINICK: Foiled again, King.

KING: Pete on the Street, thanks. We should note for the record, BP now has the original photo up on its web site the Photoshop version. That's all for us tonight. Campbell Brown takes it away right now.